Stock-Based Plans and Stock-Based Compensation

We maintain several stock incentive plans under which stock-based awards are, or have been, granted to employees and non-employee directors. We issue new shares of common stock upon exercise or settlement of the stock-based awards. All of our stock plans are administered by the Compensation Committee of our Board of Directors, which determines the grantees, the number of shares of common stock for which awards may be exercised or settled and the exercise or grant prices of such shares, among other terms and conditions of stock-based awards under our stock-based plans.

With the approval of the 2014 Stock Incentive Plan (the “2014 Plan”) in May 2014, no further grants of stock-based awards may be made under our 2010 Stock Incentive Plan (the “2010 Plan”). However, the provisions of the 2010 Plan will remain in effect until all outstanding awards are exercised, settled or terminated. Shares subject to terminated awards under the 2010 Plan are not added to the pool of shares available for grant pursuant to the 2014 Plan.

Shares to be issued upon the exercise of stock options and the vesting of stock awards will come from newly issued shares.

2014 Stock Incentive Plan

The 2014 Plan provides for grants of stock options, restricted stock, restricted stock units ("RSUs"), performance awards and stock appreciation rights, as well as other stock-based awards. While incentive stock options may only be granted to employees, awards other than incentive stock options may be granted to employees, non-employee directors and outside consultants. Options granted to our employees are generally subject to a four-year vesting period. Vested options generally remain exercisable for ten years following the date of grant. RSUs generally vest over a period of three years. The exercise price of stock options must be at least equal to the fair market value per share of our common stock on the date of grant. A maximum of 1,000,000 shares of common stock are authorized for issuance under the 2014 Plan. As of December 31, 2018, there were 430,662 shares available for future awards pursuant to the 2014 Plan.

Terms of awards granted pursuant to the 2010 Plan were similar to the terms of awards granted pursuant to the 2014 Plan.

Stock-Based Compensation

Certain information regarding our stock-based compensation was as follows (in thousands, except per share amounts):



	Year Ended December 31,
	2018		2017		2016
Weighted average per share fair value of stock options granted	$	—	$	—	$	4.06
Intrinsic value of stock options exercised	388		265		223
Intrinsic value of fully-vested stock awards granted	992		1,812		944

Stock-based compensation expense was recognized in our Consolidated Statements of Operations as follows (in thousands):



	Year Ended December 31,
	2018		2017		2016
Selling, general and administrative expense	$	1,334	$	1,197	$	1,005
Cost of sales	150		119		82
Total stock-based compensation expense	$	1,484	$	1,316	$	1,087

We amortize stock-based compensation expense on a straight-line basis over the vesting period of the individual awards, which is the requisite service period, with estimated forfeitures considered.

At December 31, 2018, we had total unrecognized stock-based compensation expense of $1.7 million, which will be recognized over the weighted average remaining vesting period of 1.6 years.

The following weighted average assumptions were utilized in determining fair value pursuant to the Black-Scholes option pricing model:



	Year Ended December 31,
	2018		2017		2016
Risk-free interest rate	—	%	—	%	1.66	%
Dividend yield	—	%	—	%	—	%
Expected life	—		—		6.81 years
Volatility	—	%	—	%	51.70	%

The risk-free rate used is based on the U.S. Treasury yield curve over the estimated term of the options granted. Expected lives were estimated based on historical exercise data. The expected volatility is calculated based on the historical volatility of our common stock.

Stock-Based Awards Plan Activity

Stock Option Activity

Stock option activity for the year ended December 31, 2018 was as follows:



	Options Outstanding		Weighted Average Exercise Price
Outstanding at December 31, 2017	359,713		$	9.88
Granted	—		—
Exercised	(43,734	)	10.29
Canceled	(9,489	)	10.18
Outstanding at December 31, 2018	306,490		9.82

Certain information regarding options outstanding as of December 31, 2018 was as follows:



	Options Outstanding		Options Exercisable
Number	306,490		224,714
Weighted average exercise price	$	9.82	$	9.92
Aggregate intrinsic value	$	1,384,000	$	992,000
Weighted average remaining contractual term	5.7 years		5.4 years

Restricted Stock Unit Activity

In February 2018, we granted a total of 46,785 RSUs with a grant date fair value of $18.25 per share to selected executive officers and other members of our executive and impact leadership teams. The RSUs vest on March 31, 2021, provided that the participant continues to be employed through that date.

In May 2018, we granted a total of 500 RSUs with a grant date fair value of $18.75 per share to a member of the impact leadership team. The RSUs vest on May 31, 2019, provided that the participant continues to be employed though that date. In May 2018, we granted a total of 1,080 RSUs with a grant date fair value of $18.75 per share to a member of the impact leadership team. The RSUs vest on March 31, 2021, provided that the participant continues to be employed though that date.

In June 2018, we granted a total of 12,806 RSUs with a grant date fair value of $19.60 per share to our full-time, non-executive employees, subject to our achievement of EBITDA at a specified target level for the year ended December 31, 2018. For this grant, 81.6% of the target number of RSUs will vest on May 31, 2019, provided that the participant continues to be employed through that date.

In October 2018, we granted a total of 2,602 RSUs with a grant date fair value of $17.23 per share to new members of our impact leadership team. The RSUs vest on October 10, 2021, provided that the participant continues to be employed through that date.

In February 2017, we granted a total of 59,395 RSUs with a grant date fair value of $15.85 per share to selected executive officers and other members of our executive and impact leadership teams. The RSUs vest on March 31, 2020, provided that the participant continues to be employed through that date.

In June 2017, we granted a total of 14,526 RSUs with a grant date fair value of $17.45 per share to our full-time, non-executive employees, subject to our achievement of EBITDA at a specified target level for the year ended December 31, 2017. For this grant, 84% of the target number of RSUs vested on May 31, 2018, provided that the participant continued to be employed through that date.

In November 2017, we granted 4,393 RSUs with a grant date fair value of $19.35 per share to an executive officer. For this grant, 879 RSUs vested on December 31, 2018. The remaining RSUs vest in installments on each of December 31, 2019 and 2020 per a vesting schedule, provided that the participant continues to be employed through that date.

During 2016, we granted a total of 52,503 RSUs with a weighted average grant date fair value of $7.69 per share to selected officers and other members of our leadership teams. The RSUs will vest on March 31, 2019, provided that the participant continues to be employed through that date.

Performance-Based Stock Awards Activity

We granted performance-based stock awards to selected executives in each of the past eight years. Performance goals for the 2018 awards are tied to target amounts of the compounded-average growth rates of Net Sales and average adjusted EBITDA margin over a three-year performance period. The awards outstanding at December 31, 2018 will vest from zero to 125% of the targeted number of performance shares.

Cumulative activity related to performance-based awards during the year ended December 31, 2018 was as follows (in shares):



	Awards Expected to Vest		Weighted Average Grant Date Fair Value Per Share
Awards expected to vest as of January 1, 2018	183,721		$	10.41
Granted (target amount)	41,080		18.25
Canceled due to termination of employee	(52,628	)	11.51
Not expected to vest due to failure to meet performance goals	(92,805	)	7.69
Awards expected to vest as of December 31, 2018	79,368		16.85

Stock Grants

On the date of our 2018 Annual Meeting of Shareholders, each non-employee director received an annual grant of fully-vested shares of our common stock with a fair value of $47,500, except for the chairman whose grant had a fair value of $70,000. The 2018 grants included 2,534 fully-vested shares of common stock issued to seven of our non-employee directors; the chairman received 3,734 shares, for a total of 21,472 shares.